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    Agriculture Loan

    Agricultural loans are any loans that are availed by a farmer to fund seasonal agricultural operations or related activities like animal farming, pisci-culture or purchase of land or agricultural tools. While seasonal agricultural operations routine activities like include preparing and ploughing land for sowing, weeding, and transplantation where necessary, buying inputs such as fertilizers, seeds, insecticides etc. and engaging labour for cultivating and harvesting the crops.

    In addition purchasing of land, or purchasing of agricultural tools, storage of produce and transport also are included under purview of agricultural loans.

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    The agricultural policy of the Government of India also envisages substantial credit flow to increase agricultural production and productivity. Banks provide agricultural term loans to farmers for investment purposes and Short Term Loans for production purposes. There is a need to finance farmers for purchasing land not only to expand their activities but also to make existing small and marginal units economically viable, diversify their present activities and to bring fallow lands and waste lands under cultivation.

    In India, agriculture has been marked as priority sector because farmers constitute a large part of the population. As such agriculture sector qualifies for priority sector lending at lower interest rates by banks. In India, most of the commercial banks, co-op societies and rural banks provide agricultural loans to farmers.

    Documentation Required for Agricultural Loan

    Banks sanction agricultural loans, both long-term and short-term to farmers for agricultural activity. Keeping in view the illiteracy of farmers, the documentation requirement is few. However banks insist on the following documentation for agricultural loans:

    • ID proof-Voter ID, Photo ration card. Aadhar etc
    • Residence proof-Ration card
    • Land ownership proof-records of rights, revenue receipt etc
    • Kisan Credit Card-This is a card issued to all farmers including small and marginal farmers, tenant farmer, share croppers and oral lessees

    Please note that required documents may vary from bank to bank.

    Agricultural Loan Eligibility

    Agricultural loans are extended to all types of farmers such as small and marginal farmers, tenant farmer, share croppers and oral lessees.

    Agricultural Loan Interest Rate

    As per government notification, for crop loans the rate of interest and collateral requirement is as follows:

    On crop loans: For 2013-14, as per Govt of India notification, crop loans worth Rs. 3 lakh or below would carry an interest rate of 7% p.a. For those farmers promptly repaying loans, Govt. of India also provide allows interest subvention of 3% p.a-effectively bringing down interest rate to 4% p.a.

    Crop Loans beyond Rs. 3 Lakh, banks charge interest rate as approved by RBI and other conditions as approved by their Board of Directors.

    As per RBI directive, crop loans till an amount of Rs. 1 lakh require no security. Loans over Rs. 1 lakh may require security as per the lending banks terms and conditions.

    Post-harvest: Post-harvest loan is available to farmers at a concessional rate of 7% with interest rate subvention. For farmers availing post-harvest loan against the negotiable warehouse receipts, the banks may charge interest at commercial rates.

    For land purchase: Banks extend credit for purchase of land within 5 km of the farmers residence at interest rate as determined from time to time. There is no margin for such loans up to Rs 50,000 and amounts higher than this require a margin of 10%. The land is supposed to mortgaged in favour of the Bank and is considered the security.

    How to Calculate EMI for an Agricultural Loan

    With BankBazaar.com loan EMI calculator, anyone willing to apply for an agricultural loans can fill in a few details like agricultural loan amount required, rate of interest and tenure and can know the exact equal monthly instalment to know how much they would be paying for each month. The EMI calculator also lets you know the schedule of repayment of your agricultural loan-i.e how much is paid, what remains to be paid and the total interest paid.

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    Effects of the 2018-19 Union Budget Meeting on Agriculture Sector

    Spearheaded by the Finance Minister - Mr. Arun Jaitley, the 2018-19 Union Budget Meeting was held on 1 February 2018. The meeting emphasised on expenditure, investment, and policy initiatives by the Government to improve the economy of various sectors such as agriculture, health, education, MSME, infrastructure, education, finance, employment, and many more. The Union Budget meeting also focused on how to improve the cash economy of the country.

    Highlights of the Union Budget 2018-19 in Terms of Agriculture

    • The Union Budget aimed to help farmers generate higher incomes from the same land parcel by obtaining a minimum of 50% more than their initial investment on crops.
    • In case the cost of the produce market becomes less than the Minimum Support Price (MSP), the Government is liable to purchase the agricultural produce at MSP or help farmers receive MSP with the help of Niti Aayog.
    • The Government will establish a committee that will not only impose relevant policies and practices applicable to the price and demand, but will also take decisions pertaining to the imports and exports within the country.
    • The Finance Minister also stated that 22,000 rural haats will be upgraded to Gramin Agricultural Markets (GrAMs) allowing farmers to sell directly to the customers or purchase goods in bulk.
    • An Agri-Market Infrastructure Fund of Rs.2,000 crore will be allocated for the development of the GrAMs and Agricultural Produce Market Committees (APMC).
    • The Prime Minister Gram Sadak Yojana Phase III will be put in place to provide all-weather roads to areas that are still uncovered.
    • The Government will further promote cluster-based development of agri-commodities to alter the entire chain of production and marketing.
    • The Union Budget also emphasised in the development of small and cottage industries by allocating Rs.200 crore to this end.
    • The allocation for the Ministry of Food Processing is doubled from the previous financial year to amount to Rs.1,400 crore.
    • The Government will also allocate a corpus of Rs.500 crore towards agri-logistics, Farmer Producers Organizations (FPOs), and processing facilities.
    • To offer more benefits to small and marginal farmers, animal husbandry farmers and fisheries will be offered Kisan Credit Cards.
    • The Government also intends to promote the bamboo sector by allocation a sum of Rs.1,290 crore.
    • The 2018-19 Union Budget emphasised on the adoption of solar-powered systems for agricultural purposes. To this end, the Government will not only encourage distribution companies to purchase the additional power generated by the farmers, but will also expand the scope of Long Term Irrigation Fund (LTIF).
    • For the infrastructural development of the fisheries and animal husbandry sector, the Government will allocate a total corpus of Rs.10,000 crore.
    • The meeting also witnessed a rise in the institutional credit for the agriculture sector which is proposed to be Rs.11 lakh.

    Agriculture Loan FAQs

    1. Can loan be availed for purchase of land?

    Yes, banks do extend loans to farmers for purchasing lands. However, banks usually finance purchase of land within a radius of 3 to 5 Kms of their residence or within village boundary.

    2. Who can apply for such land purchase?

    Farmers who own less than 2.5 acres of irrigated land or 5 acres of non-irrigated land, i.e-marginal and small farmers-are eligible to buy land by availing a bank loan. Sharecroppers and tenant farmers can also be covered under the scheme.

    3. Can loans be availed for purchasing land in the name of women?

    Yes, it is possible. As per Govt policy women owning land could lead to their empowerment. Hence, purchase of land in women can be financed and preference can be given to women in distress, SHG members and widows etc.

    4. What are the other allied activities eligible for agricultural loan?

    In addition purchasing of land, or purchasing of agricultural tools, storage of produce and transport also are included under purview of agricultural loans.

    5. How much agricultural loan can be availed without any security?

    To encourage institutional borrowing among farmers, banks have relaxed security or collateral for agricultural loans.

    As per RBI directive, crop loans till an amount of Rs. 1 lakh require no security. Loans over Rs. 1 lakh may require security as per the lending banks terms and conditions.

    Similarly, there is no margin for loans for purchase of land up to Rs 50,000 and amounts higher than this require a margin of 10%. The land is supposed to mortgaged in favour of the Bank and is considered the security.

    Agriculture Loan Reviews

    • ICICI Bank Personal Loan
      "Very good response..."
      0.5 4.0/5 "Great!"
      While the personal loan process there was a very good response and revert from the ICICI bank. However I could not submit the documents that for personal loan. I am not working in a company right now where I am doing my own agriculture business. This is one of the reasons to close the application.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 07, 2016
    • Bank Bazaar Personal Loan
      "Fast Delivery service"
      0.5 5.0/5 "Blown Away!"
      There was a quick response within 10 minutes from bankbazaar once i registered on the website and it is easy to use. I would be good if bankbazaar gives options to select the Regional languages to understand the portal much easier and they can also introduce agriculture loans.
      Was this review helpful? 0
      , mumbai
      Reviewed on Aug 11, 2015
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